How innovations can affect
internationalization process
of the company
Case study of Accell group in Scandinavia
Semester Project 1
Group 21
Autumn Semester 2013-2014
Aalborg University
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Title page
Education:
Aalborg University – MSc International Business Economics
Subject:
Business Research Methods & Theory of Science
Supervisor:
Sara Møller Nielsen
Group No.:
21
Delivery date: 09-01-2014
Pages: 51
Words: 13 460
Vitalijus Sverckovas
Nikolaj Fedin
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Table of Content
Contents
Title page ................................................................................................................................... 1
Table of Content ........................................................................................................................ 2
Table of Figures ......................................................................................................................... 4
1.Introduction ............................................................................................................................. 5
Company presentation History of Accell group ..................................................................... 5
1.1 About the company .......................................................................................................... 5
1.1.1 Clients and products .................................................................................................. 7
1.1.2 Electric bicycles ......................................................................................................... 9
1.2 Problem formulation ...................................................................................................... 10
1.2.1 Key words ............................................................................................................... 11
1.2.2 Research questions .................................................................................................. 11
1.2.4 Aim of the project ................................................................................................... 11
2. Limitations ........................................................................................................................... 13
2.1 Limitations of a qualitative methodology ...................................................................... 13
3. Methodology ........................................................................................................................ 14
3.1 Definition of a paradigm ................................................................................................ 14
3.2 Paradigms in social science ............................................................................................ 14
3.3 Four sets of assumptions in social science ..................................................................... 15
3.3.1 Ontology .................................................................................................................. 16
3.3.2 Epistemology........................................................................................................... 17
3.3.3 Human nature .......................................................................................................... 17
3.3.4 Methodology ........................................................................................................... 17
3.4 Paradigmatic classification; Typology ........................................................................... 18
3.4.1 Functionalism .......................................................................................................... 18
3.4.2 Interpretivism .......................................................................................................... 18
3.4.3 Structuralism ........................................................................................................... 18
3.4.4 Interactionism .......................................................................................................... 19
3.5 Burrel’s and Morgan’s view on social science............................................................... 19
3.5.1 The functionalist paradigm...................................................................................... 19
3.5.2 The interpretive paradigm ....................................................................................... 19
3.5.3 The radical humanist paradigm ............................................................................... 20
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3.5.4 The radical structuralist paradigm ........................................................................... 20
3.6 Arbnor & Bjerke’s classification.................................................................................... 20
3.7 Our choice ...................................................................................................................... 23
3.7.1 FISI and RRIF choice .............................................................................................. 23
3.7.2 Choice of paradigm according to Arbnor & Bjerke ................................................ 24
3.8 Research approach.......................................................................................................... 26
3.9 Research methods ........................................................................................................... 27
3.10 Research design ............................................................................................................ 27
4.Theoretical part ..................................................................................................................... 30
4.1 Innovations ..................................................................................................................... 31
4.2 Link between Internationalization and innovation ......................................................... 31
4.3 Hofstede’s dimensions ................................................................................................... 33
4.4 Entry modes.................................................................................................................... 34
4.4.1 Licensing: ................................................................................................................ 35
4.4.2 Joint ventures: .......................................................................................................... 35
4.4.3 Wholly owned subsidiaries:..................................................................................... 35
4.4.4 Franchising .............................................................................................................. 36
4.4.5 Turnkey project........................................................................................................ 36
5. Analysis................................................................................................................................ 37
5.1 Choice of country to enter according to Hofstede’s 5 dimensions ................................ 37
5.1.1 Sweden in comparison with Germany and the Netherlands .................................... 37
5.1.2 Norway in comparison with Germany and the Netherlands.................................... 39
5.1.3 Finland in comparison with Germany and the Netherlands .................................... 41
5.1.4 Denmark in comparison with Germany and the Netherlands ................................. 42
5.2 Interview......................................................................................................................... 47
5.3 Uppsala model ................................................................................................................ 48
5.4 Innovations impact on choice of entry mode ................................................................. 49
5.4.1 Entry mode for Accell group ................................................................................... 50
6. Conclusion ........................................................................................................................... 51
Literature reviewed .................................................................................................................. 52
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Table of Figures
Table 1 Four Paradigm Model of Social Theory (Burrell and Morgan 1979) ......................... 15
Table 2 differences between the subjective objective methods(Burrel and Morgan, 1979) .... 16
Table 3 Our assumptions on four dimensions.......................................................................... 24
Table 4 Source:Slides by John Kuada- Business Research Methods, 2012 ........................... 25
Table 5 ..................................................................................................................................... 37
Table 6 ..................................................................................................................................... 40
Table 7 ..................................................................................................................................... 41
Table 8 ..................................................................................................................................... 43
Figure 1Accel group turnover by country (Annual report, 2012) .............................................. 8
Figure 2 Accell group turnover by product (Annual report 2012)............................................. 8
Figure 3 source: own creation .................................................................................................. 21
Figure 4 Source: Bryman&Bell 2011, p.11 ............................................................................ 26
Figure 5 Research designs according to Bryman & Bell (2011). ........................................... 29
Figure 6 Advantages and disadvantages of phone interviews
(http://www.martymodell.com/pgsa2/pgsa07.html) ................................................................ 47
Figure 7 Map of overall global cleantech innovation index scores (source: cleantech group
analysis, 2012) ......................................................................................................................... 50
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1.Introduction
Company presentationHistory of Accell group
Acell group is a Dutch holding company which owns several European bicycle
manufacturers. Besides bicycles the group is also involved in the production of fitness
equipment. The group is one of the largest producers of bicycles and bicycle parts in the
world.
Accell focuses internationally on the mid-range and higher segments of the market for
bicycle, bicycle parts and accessories, fitness equipment. The group has top positions in a
number of European countries, such as: the Netherlands, Belgium, Germany, Italy, France,
Finland, Turkey, the United Kingdom, as well in the USA. In Europe Accell group is market
leader among the bicycle manufacturers in terms of revenue. Group’s best known brands are
the following: Batavus (NL), Sparta (NL), Loekie (NL), Ghost (Ger), Haibike (Ger),
Hercules (Ger), Winora (Ger), Raleigh and Diamondback (UK, US, Canada), Lapierre (Fr),
Tunturi (Fi), Atala (IT), Redline (US). Two biggest markets are the Netherlands and
Germany.(Annual report, 2012).
Acell Group and its subsidiaries employ 2 776 people worldwide in 18 countries. The
company has production facilities in the Netherlands, Germany, France, Hungary, Turkey
and Canada. Products of the group are sold in more than seventy countries. The headquarters
of the company are located in Heerenveen, NL.
Group’s shares are traded on the official market of NYSE Euronext in Amsterdam and
included in the Amsterdam Small Cap index. In 2012 Accell Group realized a profitable
revenue of 772.5 million euros.
1.1 About the company
Accell Group N.V. (“Accell Group”) is active internationally in the mid-range and higher
segments of the market for bicycles, bicycle parts & accessories and fitness equipment.
The group is market leader in Europe in the bicycle market. The market approach is based
on the key concepts quality, innovation and recognisable added value. For consumers this
means a broad and strong portfolio of brands, including international top brands and
well-known national brands, often with a long history. (Annual report, 2012).
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Accell Group operates close to
the market and largely because of its high added value and numerous innovations, sells
primarily via the specialist retail trade.(Annual report, 2012).
Opportunities: Accell's electric bicycle (e-bikes) and sport bike sales are increasing.
Traditionally Accell has catered to the mid- and higher income classes, therefore Accell has
the distribution channels in place to profit further from this growth.
Accell has pursues an active acquisition strategy acquiring market leaders or leaders in
bicycle growth segments, acquiring in the first half of 2012: Raleigh Cycle (USA, Europe),
Currie Technologies (E-bikes and electric scooters, USA) and Van Nicholas (Sports bikes,
Netherlands) further strengthening its position in these markets/segments
Solutions:Further betting on e-bikes and sports bikes.
Raising prices of accessories (rationale: instead of buying a new bike, people will spend more
on maintenance)
The sell-off of the fitness division will bring back focus on Accell's core competence
(bicycles).
Accell Group's business strategy is to keep things simple. Clearly-defined strategies lower
business risks by staying within their areas of expertise. Accell Group possesses significant
barriers to entry that slows competitive threats and increases profits.
Strategy: Focus on innovation (e-bikes, sport bikes)
Design
Invest in Strong Brands
Strong distribution channels (expert shops, dense network, internet)
Vertical or horizontal integration
Realizing cost, marketing and sales synergies
High-qualified labor force
Competitive Advantages: Economies of scale in production, marketing and distribution
Dense distribution network
Import barriers shield from cheap substitution products
Management team is a disciplined acquirer and prepared to walk away from bidding contests
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1.1.1 Clients and products
Accell Group focuses on the mid-range and higher segments of the market. In these
segments, in whichconsumers are willing to make an extra investment in quality, strong,
high-profile national and international brands are the key to success. An important strategic
challenge for Accell Group is to ensure that these brands provide consumers and specialist
retailers with sustainable added value. This makes continuous investment and a clear focus on
innovation and design essential in these segments. Continues innovation and adaptation of the
products to the wishes of discerning consumers guarantee that Accell Group brands and
products remain attractive to their specific target groups. It also creates opportunities to
further expand and develop Accell Group’s strong market positions both nationally and
internationally. The Accell Group companies also have to operate close to the market so they
can respond rapidly to consumers’ specific demands, for instance through the production of
small(er) series and custom-made bicycles. (Annual report, 2012)
• Creating innovative, high-quality and recognizable products with strong brands
• Positioning, promoting and expanding the brand portfolio, targeted marketing on retailers
and consumers and intensive cooperation with and support for the expert retail trade
• Consistently managing costs, inventory management, portfolio management and further
exploitation of synergies especially after acquisition Raleigh
• Actively seeking possible acquisitions
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Accel Group turnover by country
Netherlands (27%)
Germany (25%)
Rest of Europe (30%
North America (14%)
Other countries (4%)
Figure 1Accel group turnover by country (Annual report, 2012)
Accell Group turnover by product 2012
Bicycles (71%)
Parts and Accessories (26%)
Fitness equipment (3%)
Figure 2 Accell group turnover by product (Annual report 2012)
The above charts show us the few biggest markets of Accell Group in comparison to other
countries. It will be relevant for the further research.
Accell Group’s ambition is to be a leader in the field of development and sale of sustainable
consumer goods for short-distance mobility, fitness and active recreation. The market
approach is based on the key concepts ‘quality’, ‘innovation’ and ‘recognisable added value’.
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Accell Group operates close to the market and, largely due to the high added value of its
products and numerous innovations, sells primarily via the specialist retail trade in countries
in which it has leading market positions.
Accell Group’s organizational structure comprises of independently operating subsidiaries
that bear primary responsibility for their market positions. Accell Group maintains the
holding function within this structure and, in addition to strategy, is responsible for matters
including treasury, financial control, business development, investor relations and the
coordination of marketing, product development, production planning and procurement in
order to achieve synergies.
1.1.2 Electric bicycles
The chosen aspect of innovations in project is electric bicycle. It has significant advantages
comparing with our innovations which can help to internationalize easier, more profitable and
with lesser risk. The main reasons of choosing e-bikes as a main indicator of innovations are
these:

Sales of e-bikes are increasing each year in Denmark

Denmark has a big segment on which e-bikes sales are focused

E-bikes can be determinate as a transport of future for daily use
In Holland, a country where they traditionally use bicycles a lot there was in 2007 sold
100,000 electrical bikes, which represents approximately 10% of the market. If there were an
equal number sold in Denmark it would equate to a figure of 50,000 cycles.(company
webpage)
Globally are electrical bicycles sold in the millions and this figure is expected to rise because
prices of electrical bikes are constantly falling, while the quality keeps getting better - bikes
are running longer and longer on a charge simultaneously with the batteries that are getting
lighter and the bikes get a nicer design.
After first release e-bikes wasn’t very popular due to lack of comfort, battery life, heavy
weight and noise. Something needed to be changed - the new electric bicycle would have to
be lighter and quieter, with electric parts that were less conspicuous. The result is an electric
bicycle that is 5 kg lighter quiet and looks like a normal, modern bicycle. Sparta has many
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years' knowledge and experience in the development, production and sale of (electric)
bicycles. Sparta would have liked to construct the bicycle from standard parts. (Annual
report, 2012). Unfortunately, the components required were not available in the market,
which meant that they had to be developed especially for the electric bicycle, ION. To make
the electric components more difficult to see, it was necessary to integrate the components
mentioned above into the bicycle. The basic concept for ION was formed by building the
battery into the frame of the bicycle so that it could no longer be seen, and by placing the
motor in the hub of the bicycle's rear axle. The result was an elegant basic design, in which
the most important electric components have been concealed from sight.(Sparta B.V annual
report, 2012).
In Holland, a country where they traditionally use bicycles a lot there was in 2007 sold
100,000 electrical bikes, which represents approximately 10% of the market. If there were an
equal number sold in Denmark it would equate to a figure of 50,000 cycles. (Sparta B.V
annual report, 2012).
Globally electric bicycles sales reaches millions and this figure is expected to rise because
prices of electrical bikes are constantly falling, while the quality keeps getting better - bikes
are running longer and longer on a charge simultaneously with the batteries that are getting
lighter and the bikes get a nicer design.
All of these reasons mentioned above let us see electric bicycle as a strongest part of
innovation which can affect company’s internationalization.
1.2 Problem formulation
How innovations can affect internationalizations process of a firm in Scandinavian region
Based on this problem formulation we have already assumed that innovations within the
company and company’s products can give some advantages on a company’s entry in a
foreign country. Our hypothesis will therefore be to find out if the innovations actually
generate advantages or if the hypotheses can be rejected.
After the data collection and the findings the group are able to confirm or reject the
hypotheses, and valuate and revise the chosen theory.
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When using a deductive approach in a project the researchers must have in mind that the
analysis and findings can give new theoretical ideas, and if these theories are implemented in
to the project, this part will be with an inductive approach. Furthermore these findings and
the new theories can impact the hypothesis and force the group to reject the hypotheses and
create a new. (Bryman & Bell 2011, p. 12)
1.2.1 Key words
Innovations, entry modes, bike manufacture,internationalization
1.2.2 Research questions
1) How innovations can affect internationalization of the company
2) Which Scandinavian country and why is best to internationalize for Accell group
3) Which entry mode is best to choose for internationalization
1.2.3 Problem justification
What is the importance of innovations in firm’s internationalization’s decisions.
In our research we will focus on Scandinavian coutries and one of Accell Group’s member
Sparta B.V, its possibilities and opportunities to enter Scandinavia with its unusual and
innovative product line.
Because of the limits of primary data and limited secondary data we are only using Sparta
B.V as an illustration. Because of these limitations we will move our research from amicro
level research to a meso level, and we will therefore focus more on the overall picture of
innovative firms and products and only use facts from Accell where it is appropriate.
1.2.4 Aim of the project
Compare literature about entry modes for internationalisation with real-life bike manufacture
company group - Accell. Then we can see if a general theory can be applied more specifically
(to a bike industry). So basically we are a testing theory by applying it to an actual company
in a certain industry. Then trying to explain why Accell choose X instead of Y, and if it was a
better option.
Methodology part will explain a system of methods and principles used in designated study
case. First part of methodology will be focused on defining of case study as a research
method, determining conditions, as well as strengths and limitations. In addition, research
design of project will be presented, consisted of initial components. After preparing,
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collecting of data and analysing will be evaluated by using appropriate analytic technique.
Subsequently, facilitate for reader to understand link between problem formulation and
chosen methodology approach, through understanding the way of collecting and analysing
data.
The use of constant comparison means that one piece of data (for example, an interview) is
compared with previous data and not considered on its own, enabling researchers to treat the
data as a whole rather than fragmenting it. Constant comparison also enables the researcher to
identify emerging/unanticipated themes within the research project.
The key concepts dealt with in this project are innovation, entry modes and
internationalization. Since the understanding of these concepts may differ among individuals,
this section serves to establish to how they are interpreted in this particular paper.
The term ‘innovation’ in the business refers to the “process of translating an idea or invention
into a good or service that creates value or for which customers are willing to pay.” (Business
Dictionary, 2013)
To be called an innovation, an idea must be replicable at an economical cost and must satisfy
a specific need. Innovation involves deliberate application of information, imagination and
initiative in driven greater or different values from resources, and includes all processes by
which new ideas are generated and converted into useful products. In business innovation
often results when ideas are applied by company in order to further satisfy the needs and
expectations of the customers. In a social context innovation helps create new methods for
alliance creation, joint venturing, flexible work hours, and creation of buyers’ purchasing
power. Innovations are divided into two broad categories:
1. Evolutionary innovations (continuous or dynamic evolutionary innovation) that are
brought about by many incremental advances in technology or processes.
2. Revolutionary innovations (also called discontinuous innovations) which are often
disruptive and new.
Innovation are often associated with risk taking and firms that create new unusual products or
technologies take the biggest risk as they create new markets.
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In our project we have decided to embrace their definition of the innovation, which is “the
process of translating an idea or invention into a good or service that creates value or for
which customers will to pay” (Business Dictionary, 2013).
2. Limitations
The limitations of the study are those characteristics of design or methodology that impacted
or influenced the application or interpretation of the results of this research. They are the
constraints on utility of findings that are the result of the ways in which we chose to design
the study and/or the method used to establish internal and external validity.
This project is greatly limited by a strict deadline.Conducting primary research would have to
include an interview or survey within terms of tasks, this would mean waiting for a response
from the management, scheduling a meeting, preparation for the interview, and analysing the
qualitative data obtained. All of that would precede an actual drafting of the project, which
also takes certain time. That’s why for this project only 1 primary data was used (interview
via phone with one of the managers of Accell Group’s company Sparta B.V).
To prevent project time deadline issues, we have decided to conduct a secondary research.
Whilst the secondary research provides certain advantages, such as the ease and low cost of
access, it also comes with a number of limitations, which are important to be aware of. First
of all, it is sometimes difficult to accurately assess the quality of the existing research in
terms of validity and reliability. Secondly, the existing information sometimes does not fit a
researcher’s needs perfectly. Therefore we are forced to work with literature where
information provided is only similar to our needs. Finally, the some of the information out
there might be incomplete or out-dated.
2.1 Limitations of a qualitative methodology
Qualitative research is increasingly common, particularly in the social sciences, as an
alternative to quantitative research. While quantitative research focuses on numerically or
statistically significant differences among populations, qualitative research often involves
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looking for "thick" and "rich" detail about a particular question, phenomenon, or group of
people (Peshkin, 1997, quoted in Watt, 2007). Although it has gained increasing acceptance,
qualitative research still has significant limitations. In particular, qualitative research can
present challenges in terms of generalizable results, validity, wider implications and
reliability.
Although the terms reliability and validity traditionally have been associated with
quantitative research, increasingly they are being seen as important concepts in qualitative
research as well. Examining the data for reliability and validity assesses both the objectivity
and credibility of the research. Validity relates to the honesty and genuineness of the research
data, while reliability relates to the reproducibility and stability of the data.
3. Methodology
3.1 Definition of a paradigm
There is many definitions of paradigms in literature, and there is no right or wrong ones it
depends on how researcher understand them. Kuhn (1970) describes it as a cluster of beliefs,
which guide researchers to decide what should be studied and how results should be
interpreted. However Arbnor and Bjerke describes paradigms as following: “A paradigm is
any set of general and ultimate ideas of the constitution of reality, the structure of science,
scientific ideals and the like” (Arbnor&Bjerke 1997). And according to Kinash, “Paradigm is
a matrix of beliefs and perceptions” (Kinash, p. 1).
As we can see, there are different views and these different descriptions and definitions lead
to different interpretations of the research topic. Thus, these interpretations lead us to
different research methods. Available paradigms and our personal choice of paradigm will be
explained further, as it is vital in order to find and use appropriate theories that suitable
paradigm holds.
3.2 Paradigms in social science
By Burrell and Morgan research (1979), there are four paradigms for social sciences research,
within which business research is just one type:
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
Functionalist (problem – solving rational approach to organizations)

Interpretive (organizations only understood through perceptions of people about those
organizations)

Radical humanist (organizations are social arrangements and research is about
changing them)

Radical structuralist (organizations are a product of structural power relations, where
conflict is inherent)
These paradigms are inconsistent with each other, which means if you hold one paradigm,
you cannot also hold a different one. Therefore they hold different research methods and
focus on different areas for study.
Among the many models which describe paradigms in social and organizational theory, the
one that was developed by Burell and Morgan received the most attention by other
researchers. Authors define four paradigms for organizational analysis by intersecting
subject-object debates in the theory of social science with consensus-conflict debates in the
theory of society. The four paradigms produced in the end are the ones mentioned above: the
functionalist, the interpretive, the radical humanist, and the radical structuralist (table 1).
The Sociology of Radical Change
Radical Humanist
Radical
structuralist
Subjective
Interpretative
Objective
Functionalist
The Sociology of Regulation
Table 1 Four Paradigm Model of Social Theory (Burrell and Morgan 1979)
3.3 Four sets of assumptions in social science
For analysing social science Burell and Morgan suggest to conceptualize “four sets of
assumptions related to ontology, epistemology, human nature and methodology”
(Burell&Morgan, 1979).
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The following figure shows differences between the subjective objective methods to
ontology, epistemology, human nature and methodology. This also can be seen as a scheme
for analysing assumptions about the nature of social science.
Table 2 differences between the subjective objective methods(Burrel and Morgan, 1979)
3.3.1 Ontology
Ontology refers to the reality. Is the reality a part of the individual consciousness or is it an
external factor to the conscious. In other words you can differ between if you believe that
there is an external social world that affect the individual person, or if it is the individual
person how affect and create the real world. (Kuada 2012, p. 58-59)
Our figure shows that realism’s and nominalism’s ontologies are different. Nominalism is
related to the type of ontology that denies the existence of universal entities or objects, yet
accepts that some particular entities or objects exist. To put it simple nominalism assumes,
that there are concepts and labels that make individual structure reality. Realism assumes
that social world is real and exists separate from the individual’s perception. This world has
hard, intangible structures that exist regardless of our labels.
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3.3.2 Epistemology
Epistemology relates to how knowledge can be acquired and how the truth can be found.
Some says that the truth can be found as an external observer in a specific social world.
Others believe that the researcher has to be a part of the internal world, to be able to see the
truth about a subject. (Kuada 2012, p. 59)
It is divided into a positivism and anti-positivism. Positivism tries to explain and predict what
happens in the social world in the way of searching for patterns and relationships. Positivism
applies an approach when hypotheses are developed and tested. Anti-positivism states that
you can not find the truth and understand it by observing behaviour. Moreover, it claims that
social science can’t create objective knowledge of any kind.
3.3.3 Human nature
Human nature is if we are products of the environment or if the environment is created by the
individual people. (Kuada 2012, p. 59).
Human nature differs between voluntarism and determinism. Determinism states that human
beings are determined by the environment and situation they are in. On the other hand
voluntarism states that human beings are completely free, autonomous and possess a free
will.
3.3.4 Methodology
Methodology refers to the choice of specific methods the researcher use to obtain knowledge.
(Kuada 2012, p. 59)
Methodology consists of ideographic and nomothetic. Ideographic focuses on detailed
observation of the society. Nomothetic involves hypotheses testing and uses methods such as
surveys or other standardized research tools.
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3.4 Paradigmatic classification; Typology
3.4.1 Functionalism
Functionalism is one of the main theoretical perspectives in sociology. Its origins are in the
works of Emile Durkheim who was interested in how society remains stable and how social
order is possible.
Functionalism tries to interpret each part of society based on how it contributes to the
stability of the society as a whole. It claims that society is something more than the sum of its
parts – each part of society is functional and essential for the stability of the whole society.
The different are primarily the institutions of the society, each of them is organized to satisfy
different needs and each has its own consequences for the form and shape of society. The
parts all depend on each other.
In business economics, scientists with the functionalistic perspective view organizations as
rational entities that adapt to the environment to maximize efficiency (Kuada 2011, p. 46).
3.4.2 Interpretivism
Interpretivism is opposite to the positivism. It claims that the social world can not be studied
employing the same methods of investigation as for the natural world. Interpretivism states
that both reality and our knowledge are social products, thus they can not be understood apart
from the researcher or independent of the social actors, because they construct and make
sense of that reality. According to that the world is conceived as “an emergent social process
– as an extension of human consciousness and subjective experience” (Burell&Morgan 1979,
p 253). The interpretive perspective attempts to “understand the intersubjective meanings
embedded in social life and hence to explain why people act the way they do” (Gibbons
1987, p 3).
3.4.3 Structuralism
Structuralism is an analytical tool which is widely used in social and cultural studies. This
theory indicates three key components:1) look a system as whole rather than individual part,
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2) transformation in this system and 3) transformation usually endogen inside the system
(Piaget, 1970). Structuralists’ emphasis is on classification of components of a system.
3.4.4 Interactionism
Interactionism is focused on the details of what goes on between individuals in everyday life.
Interactionism could study and be interested in how we interpret and use symbols – not only
in order to communicate with each other, but to create impression of ourselves, to create and
carry on what we experience as the reality of a certain social situation. From this perspective
social life made up largely of a complex system of countless interactions through which life
takes on shape and meaning.
3.5 Burrel’s and Morgan’s view on social science
3.5.1 The functionalist paradigm
The functionalist paradigm, which rests upon the establishment that society has a real
and concrete existence and it is systematic, and directed toward the production of order
and regulation. The social science in that point of view is objective and value free. This
paradigm approves a research process in which the researcher is distanced from the case
subject by strictness of the scientific method. The paradigm holds a pragmatic orientation;
it’s concerned with analysing society in a way which produces useful knowledge.
3.5.2 The interpretive paradigm
In the interpretive paradigm, the social world possesses a “precarious ontological
status”. From this point of view social reality although it is possesses order and regulation
doesn’t possess an external concrete form. It is the product of intersubjective experience.
This theory claims that the social world is best understood from the viewpoint of the
participant-in-action. The interpretive researcher seeks to dismiss the processes through
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which shared realities are created, sustained and changed. This paradigm consider
attempts to develop a purely objective social science as specious.
3.5.3 The radical humanist paradigm
The radical humanist paradigm shares with the interpretive paradigm the assumption
that everyday reality is socially constructed. However in this paradigm social
construction is tied to a “pathology of consciousness” , a situation in which individuals
find themselves the prisoners of the social reality their create. Radical humanists, for
example, critique the alienating modes of thoughts which characterize life in modern
industrial societies. Capitalism, in particular is subject to criticize in the humanist’s
concern to “link action and thoughts as a means of transcending alienation.” (John
Hassard, 278)
3.5.4 The radical structuralist paradigm
This paradigm also holds a radical social critique, however, different from the radical
humanist paradigm it is being tied to a materialist conception of the social world. Social
reality is a “fact” in this paradigm. It has a hard external existence of it’s own and takes a
form which is independent of the way it’s socially constructed. In the radical structuralist
paradigm intrinsic tensions and contradictions are characterizing the social world. These
forces help to bring about radical changeе in the social system as a whole.
3.6 Arbnor & Bjerke’s classification
Bryman and Bell agree with Arbnor and Bjerke that the most appropriate research approach
depends on the study area and the beliefs of the researcher himself about the reality, but add
that the choice is also influenced by the relationship formed between the theories and
research, and philosophical stance of the researcher in regards to whether natural science
methods could be used for social science research, and whether reality is seen as objective or
dependent on the actors. The last two factors could, however, be incorporated into the views
of the researcher about the reality in Arbnorand Bjerke’s discussion, and the two various
views on factors influencing the choice of the most appropriate research approach are then
similar, each stating that the research approach choice must be consistent with both the
philosophy of the researcher in regards toreality and knowledge creation, and the study area,
as it is showed in figure below.
20
Figure 3 source: own creation
According to Arbnor & Bjerke, the choice of the most appropriate research approach for a
specific study is dependent on two major factors: assumptions of the researcher about the
reality in which he aspires to acquire and create new knowledge, and the subject area in
focus. Therefore to choose the right research method and technique, it is necessary to make
sure that the approach fits both the problem understudy and the ultimate presumptions of the
researcher.
Paradigm is a set of certain views on reality, which influences the way we approach
problems. It is a bridge between the starting presumptions held by the researcher and the
methodological approach, and therefore, such concepts need to be understood in order to
21
understand the research process. According to Arbnor & Bjerke, there are six main groups of
social science paradigms.
Some people look at reality as external and objective phenomenon which could be accurately
measured and observed. From their point of view, subjects react to stimuli in the environment
always in a predictable way and therefore, in their research, researchers use the stimulusresponse models.
Others look at reality as an organically evolving process, in which the environment both
influences and is influenced by humans. As researchers want to understand the patterns
happening over time, their research is mostly based on carrying out interviews and analyzing
documented material.
The third group of researchers views reality as constantly changing, where people and
organizations evolve together with the environment, and in which the members continuously
adapt to information from the environment. Here, the researchers do not look at cause-effect
relations or differentiate between the object and the environment, but rather look at the
adaptation of the whole system of relations.
According to the next group of researchers, the reality is created on the basis of human
actions and interactions, and because different studies derive from different situations or start
in different context, the results will be also relative and specific for the particular situation.
However, as some situations might evolve into similar responses, more generalized theories
could be also formulated.
The fifth category of researchers looks at reality as a social construction, one that is
subjectively given. Here, in order to undertake research, people must understand the process
and methods through which the subjective reality is created. The last main group of
researchers goes even further with their view on reality as subjectively given. They consider
world to be created by individuals, who are intentional.
Researchers under these various paradigms have different views on reality. Some of them
consider reality as objective and rational, where as others think that reality is subjective and
relative. Those who consider reality as objective aim to provide explanations, and therefore
look for generalized empirical results from their research. On the other hand, researchers who
consider reality as subjective aim to achieve understanding, and therefore look for results
which are specific and concrete. When looking at the main six groups of paradigms again, it
22
could be seen that as we go further from the first category to the last sixth one, the views on
reality become more subjective and specific and so are the studies.
3.7 Our choice
As we can see from the previous paragraphs, there are different paradigms and there are
different classifications of paradigms. In our opinion it is useful at the beginning to go
through each view of paradigm we had earlier and only then choose which paradigm will we
use for our research.
3.7.1 FISI and RRIF choice
In both FISI and RRIF classifications there is functionalism. This is the paradigm we’ve
chosen to use in our research. Functionalistic approach states that “organizations make
adaptive structural changes totheir environment that render them more fit with their situations
and thereby maintain effectiveness” (Kuada 2011, p. 46).
The goal of our project is to find out how innovations and innovative products can affect or
change the process of internationalization of Accell group, its choice of entry modes,
strategy. Investigation case is if a company making an adaptive change (the choice of entry
mode) to the environment due to its products’ uniqueness (applied innovations). It also can be
seen as a question: what is the relation between these two variables?
- Demand for innovative products in a new country
- The entry mode of Accell group on retail level
Functionalistic paradigm embraces the objectivistic perspective in research is realistic,
positivistic, deterministic and nomothetic. Table below explains where our assumptions
belong in terms of these four dimensions.
We are…
Because…
…realistic.
…new market’s entering process is
composed of certain aspects (culture,
language, education…). We view these
aspects as parts of country’s environment and
23
they exist beyond the level of individual
inhabitants.
…positivistic.
…we have a literature-based hypothesis that
level of innovations and uniqueness of
company’s products has an impact on the
choice of entry mode to a foreign market. We
are using a case study to test this hypothesis.
Regardless of whether or not our hypothesis
will be confirmed, we will consider the result
as the objective truth that can be applied to
similar companies in similar situations.
…deterministic.
…we believe that people born into an
environment of a country will automatically
become a part of that environment. For
example, people born in Scandinavia are
bound to become part of the Scandinavian
culture, language, education etc.
…nomothetic.
…by having a hypothesis and using a
standardized research tools (document
study), our methodology is nomothetic.
Table 3 Our assumptions on four dimensions
3.7.2 Choice of paradigm according to Arbnor & Bjerke
We use the following figure to determine which paradigm and method this project would be
based on.
24
Table 4 Source:Slides by John Kuada- Business Research Methods, 2012
The above figure is based on table 4 from the description of Arbnor and Bjerke. This model
present six paradigms underlying the Explanatory and the Understanding knowledge. We
have limited us completely from the actors view and we cannot entirely use the analytic
approach to resolve this particular problem, because our research does not consists of
statistics and quantitative data. Our research will primarily be based on a combination
between the system and the analytic view. We do not look at Accell group in a completely
system, because we have chosen to work with a specific area of internationalization led by
innovation in specific region, and we do not include their external surroundings.
According to the FISI and RRIF classifications, we see the project with eyes of second type
of the researchers mentioned in chapter above. In Arbnor and Bjerke’s classification we see,
the reality as a concrete determining process and understand this paradigm as the
functionalism believing that the environments in the society will not change due to the fact
that individuals removed or added, and thereby is the reality concrete determined.
It can be argued that our methodology approach has some statements from analytic approach
or similar ones. We look at two variables, where the internationalization is the cause and the
innovations is the effect. The project is build up mostly by secondary qualitative data and will
not be using analytic view because of lack quantitative data. We have a clear mind about the
definition of innovation and that we cannot only look at one of the dimensions in innovation
to get the desirable result. Thus our methodology approach is to follow the systematic view.
25
If we take all elements into account it will create a synergy, which will give us a better ability
to answer our research questions.
3.8 Research approach
Our project main subject is innovations and how innovations can affect firm’s
internationalization including entry modes and future strategies. Soinnovations and
innovative products, the demand for them and selling opportunities in Scandinavia is our
main discussion topics. Based on this we will follow a deductive approach by Bryman and
Bell (Bryman & Bell 2011, p11). Here’s the illustration of the deductive approach:
Theory
Hypothesis
Data
collection
Findings
Hypotheses
confirmed
or rejected
Revision of
theory
Figure 4 Source: Bryman&Bell 2011, p.11
The deductive approach is based on a theory, as indicated above – on the theory of entry
modes and some others.
Further research will be based on some sort of hypothesis, keeping in mind implications and
advantages the company will be having due to innovations and innovative products. The
hypothesis will often be linked to the root assumption within the project group.
26
3.9 Research methods
Inside the research methods theory two broad types of data collection exist, qualitative
methods and quantitative methods (Kuada 2012, p. 91)
The qualitative method is defined by Strauss and Corbin (1998) as “any type of research that
produces findings not arrived at bystatistical procedures or other means of quantification”
(Kuada 2012, p. 93).
A qualitative data collection are usually data collected through focus groups, observations,
qualitative interviews or documentary analysis (Kuada 2012, p. 95). In these types of research
it is hard to remain objective. The researchers decides the main focus, and can easily affect
the outcome of the data. (Kuada 2012, p. 100)
Quantitative methods can be a data collection method where you often seek to test a specific
hypothesis of find numerical answers to the research questions (Kuada 2012, p. 103)
The data in the quantitative method is often collected by questionnaires through mail or
surveys or by standardized or non-standardized interviews. This method makes it easy to stay
objective because you formulate and test hypotheses, which limits the researcher to impact
the outcome. The difficulty in this method is that the researcher need ensure that the collected
data is reliable enough to make a generalization. (Kuada 2012, p. 115)
This project is based on primary and secondary data, collected through a qualitative
approach. Our used data includes articles, entry modes theory, company’s annual reports and
other relevant information.
3.10 Research design
“Research design refers to the logical structure of the inquiry. It articulates what data is
required, from whom, and how it is going to answer the research question” (Jalil 2013, p. 6).
Jalil (2013) further argues that there are various classifications of research designs. We have
decided to with classification according to Bryman & Bell (2011), which lists the following
research designs:
1) Experimental design
27
2) Cross-sectional design
3) Longitudinal design
4) Case study design
5) Comparative design
In Figure below we will now proceed to briefly describe each design, explain which one we
have selected and why, and why the others have been rejected.
Type of research design
Brief description
Experimental
A manipulation of
independent variable to
assess its influence on the
dependent variable.
Cross-sectional
Collection of data from more
than one case, at single point
of time. The data must be
quantifiable. The goal is to
detect patterns and
relationship between
variables.
Longitudinal
Analysis of change in
order/nature of observations
over time.
Case study
An in-depth study of a single
organization, single location,
a single person, or a single
Selected or de-selected and
why
Rejected. If we were to do
experimental design, we
would have to control Accell
and make it enter various
countries to see changes in
entry modes.
Rejected. While we are
trying to verify the
relationship between
innovations and choice of
entry modes and we do meet
some of these requirements
in our research, the elements
of cross-sectional research
are also part comparative
design, which we have
selected. Thus we de-selected
cross-sectional design.
Furthermore, our data is
hardly quantifiable, nor
carried out at one point of
time.
Rejected. We are not
interested in the time aspect,
neither are we making
observations. We rely solely
on secondary data collected
at one single point of time.
Rejected. Even though our
research includes a document
review of a single company,
28
event.
Comparative
The aim with this research
design is to understand
certain phenomena by
comparing them in various
different situation.
the focus of our research is
not the company itself, but
the topics of innovations and
entry modes. The illustration
of a company case is merely
a tool to analyse relationship
between those two variables.
Selected. We are trying to
compare entry modes of
Accell Group in different
countries that vary by the
location and people
mentality.
Figure 5 Research designs according to Bryman & Bell (2011).
Figure X below further depicts the structure that we will apply in our research to answer our
research questions.
29
Literature review
Choosing countries
No
variety
Analysing
Innovation's impact
• Review the existing literature on entry modes in relation
to innovations
• Our assumptions of what countries Accell Group should
enter in terms of innovative products and innovative
strategy.
• Measuring whether or not there is a potential new
market for innovative products in the Scandinavia in
relation to the company's older markets.
Variety
Case study
• Find out what strategy and entry modes should be used
by Accell in the new region and why.
• Compare the findings with what the theory suggests
Comparison with
theory
Conclusion
• Assessment of the importance of innovations and
innovative approach on the choice of entry mode by
Accell Group.
4.Theoretical part
This chapter consists of a short descriptions of the theories we used to make the analytical
part of our project. In our analysis part we will be looking into our chosen firm in the
perspective of innovations, using entry modes theory, hofstede’s cultural dimensions. So in
this chapter these theories will be reviewed and linked to our chosen problem. It is essential
for our project to find out if innovations and unique product line have major affect of the
30
choice of entry modes. Moreover we see strong link between entering new market and
Hofstede’s theory about cultural dimensions. It’s seems obvious to us that in the process of
entering a new market Hofstede’s theory could help to predict possible difficulties and come
up with a better market penetration strategy.
4.1 Innovations
The ability of firms to develop and launch new products, services, or innovative processes
that are superior to their competitors confirms a competitive advantage, ensuring a return on
investment and a strategic advance in the long run (Allocca & Kessler, 2006). Innovative
experience increased productivity, potential growth, and general sustainability in their
activities (Cefis & Marsili, 2006). In some economic sectors, the proportion of innovative
companies exceeds that of large companies (Grasley & Scott, 1979). Global strategic
direction, the enlargement of the external environment of companies, and the acquisition of
international customers are positive factors in the development of a self-sustainable
innovation dynamic.
The fundamental results of J.A. Schumpeter show technical change as a main determinant of
economic and social dynamism. Many resources emphasize the assumption of the joint
development of technology and dynamic markets. When confronted with serious structural
changes (especially technological), the evolution of marketsisconstrained by innovation. This
dynamic is guided by the interdependence between technological change and geographic
market expansion. Innovative and technologically capable companies have greater potential
for geographic market enlargement. They allow for a more rapid and efficient control of the
internationalization process (Ripolles Melia et al., 2010). On the other hand, product
innovation enablesmanagers to internationalization decisions (Cassiman & Golovko, 2010).
Export strategies increase the capacity of SME innovation by enabling access to intangible
resources, such as skilled labor (Tiwari & Hawk, 2007).
4.2 Link between Internationalization and innovation
The possible relationship between innovation and internationalization is complex and there
are strong theoretical arguments why this process could go both ways: from
internationalization to innovation and/or from innovation to internationalization. It is very
31
likely that these two phenomena are linked. More innovative firms can better compete and
thus become more internationalized. Moreover, internationalized firms are exposed to diverse
cultures and innovation environments from which they can learn. Both these processes are
likely to enhance their innovation performance. Both internationalization and innovation at
the level of firms affect the countries in which the firms are based or in which they
operate.(Melitz and Constantini, 2008)
The impact of innovation on internationalization has been explored in various studies.
Posner (1961) and Hufbauer (1966) found that trade performance and, specifically, exports
were related to the technological gap between countries. Posner’s work formed the
background to Vernon (1966) in which the innovation performance of firms and countries
determines their exports performance, then – in a time sequence – their propensity to foreign
direct investment and, eventually, both their exports and imports tendency.
Innovation can be wide ranging and include both technological and organizational
innovation. These two types of innovation are often interconnected and complementary and
both impact on performance. They both depend on a variety of elements ranging from type of
inputs to macro and industry environments to government policies to the degree of
internationalization of the firms. However in this project will be discussed inly technological
part of innovations.
As mentioned above, a high degree of internationalization – particularly in terms of the
numbers of countries in which they operate – exposes companies to diverse innovation
environments and helps them to learn from these different contexts. Knowledge transmission
at both national and international levels can take place via products and processes or via
interaction between institutions and between people in institutions. They can be interactions
between customers and suppliers (Crone and Roper 2001; Saliola and Zanfei 2009) or
contractors and principals or partners in joint ventures (Lyles and Salk 1996) or industry and
universities.
Another link between internationalization and innovation is identified in the growth literature.
For instance, Grossman and Helpman (1991) show that international integration has a
sizeable effect on economic growth. Having access to a larger market increases the
profitability of innovation activities and encourages investment in company. Further, the
international competition encourages innovation activities because international integration
32
exposes domestic firms to foreign and potentially stronger competition. Finally, access to
foreign suppliers provides access to specialized intermediate inputs and capital goods.
In all these mechanisms of transmission, networks play a key role (Uzzi and Lancaster 2003).
Different companies develop a variety of networks some internal and some external to the
company. Among the spatially diversified companies a special role in knowledge
transmission is played by transnational companies. Their activities span several countries,
and they have, therefore, access to more diverse knowledge and innovation contexts
compared to companies whose networks span a single country.
4.3Hofstede’s dimensions
In our opinion Hofstede’s cultural dimensions theory is of a great importance in the
internationalization process.
Hofstede’s theory allows us to see how values in the workplace are influenced by
culture. Hofstede developed empirical model of “dimensions” of national culture, thus
establishing a new paradigm for taking account of cultural elements in international
economics, comunication and cooperation. Hofstede uses 5-D model as a lense through
which we can explore country’s culture and get a good overview of the deep drivers of one
country’s culture relative to other world cultures.
5-D model consists of 5 dimensions:

Power distance. This dimension deals with the fact that all individuals in societies
are not equal – it expresses the attitude of the culture towards these inequalities
amongst us. Power distance is defined as the extent to which the less powerful
members of institutions and organizations within a country expect and accept that
power is distributed unequally.

Individualism. The fundamental issue addressed by this dimension is the degree
of interdependence a society maintains among its members. It has to do with
whether people´s self-image is defined in terms of “I” or “We”.
In Individualist
societies people are supposed to look after themselves and their direct family only.
In Collectivist societies people belong to ‘in groups’ that take care of them in
exchange for loyalty.
33

Masculinity / Femininity. A high score (masculine) on this dimension indicates
that the society will be driven by competition, achievement and success, with
success being defined by the winner / best in field – a value system that starts in
school and continues throughout organizational behaviour.
A low score
(feminine) on the dimension means that the dominant values in society are caring
for others and quality of life. A feminine society is one where quality of life is the
sign of success and standing out from the crowd is not admirable. The
fundamental issue here is what motivates people, wanting to be the best
(masculine) or liking what you do (feminine).

Uncertainty avoidance. The dimension Uncertainty Avoidance has to do with the
way that a society deals with the fact that the future can never be known: should
we try to control the future or just let it happen? This ambiguity brings with it
anxiety and different cultures have learnt to deal with this anxiety in different
ways. The extent to which the members of a culture feel threatened by ambiguous
or unknown situations and have created beliefs and institutions that try to avoid
these is reflected in the UAI score.

Long term orientation. The long term orientation dimension is closely related to
the teachings of Confucius and can be interpreted as dealing with society’s search
for virtue, the extent to which a society shows a pragmatic future-oriented
perspective rather than a conventional historical short-term point of view.
Using Hofstede’s model we can compare different countries by these 5 dimensions and
countries with more or less similar data are more likely to trade with each others or engage in
a mutually beneficial business relations.
4.4 Entry modes
In our analysis part we will use one or few entry modes which, in our opinion, will be
more suitable for Accell Group with it’s products line and previous experience as an
international firm. There are five different entry modes company can use to enter a new
market. They will be wxplained below.
34
4.4.1 Licensing:
This method is common in the western part of the world (Mottner and Johnson). Many
companies are licensing their business out to local entrepreneurs, and in that way making a
great growth for a small amount of money. However, this method can present some
difficulties especially if a company decides to use it for entering in foreign markets. In this
method, the home country company, lacks the control and cannot go in and make changes for
the host country company. This lack of control, gives certain instability, because if they stray
from the original strategy, customers will have a different look on the company. Thus the
positive side is that the risk is smaller for the home country company, because they only
license their product or service to an entrepreneur (Mottner and Johnson).
4.4.2 Joint ventures:
The home company, has to invest in training of the staff, management assistance and
technology in the joint venture. Then the other company comes with the competent staff to
fulfil the tasks and live up to the expectations of the investing company. However, for mother
company is very important to control what the host firm does in order to grow the business.
It is a split operation, the two companies has a shared risk and control of the operation
(Mottner and Johnson).
4.4.3 Wholly owned subsidiaries:
Owning a business has benefits, and when owing subsidiaries in another country, you
have the control to do what is best for the company. This method is more resource demanding
for the company, who has to deliver capital; money, labour, managers, technology and
marketing.
One of the advantages of the wholly owned subsidiaries way of penetrating a country is
to protect the technology from the competitors in the market. Starbucks has a very simple
concept, where they make quality coffee in a good environment, where people want to hang
out and enjoy their coffee. Therefore, they do not have anything to hide from their
competitors, because it is the brand which is selling the product.
35
4.4.4 Franchising
Franchising is pretty similar to licensing. The definition to the franchising can be defined as:
“A system in which semi-independent business owners pay fees and royalties to a parent
company in return for the right to become identified with its trademark, to sell its products or
services, and often to use its business format and system”. A smaller explanation to this
would be that a Franchisee pays the owner of another company to use the name or brand to
give themselves an advantage.
A great example of the franchising structure would be McDonalds which is build up with this
structure, where private partners open their own McDonalds restaurant and pays the company
a certain amount for the opportunity of opening the restaurant.
The franchisor will often offer a broader package of rights and resources than a licensor will.
This will often contain equipment, managerial systems, operation manual, initial trainings
and all the support that will be necessary for the franchisee to run the business in the same
way as the franchisor
The franchising method will often be used for long term cooperation.
The advantages for using the Franchising method would be much like the licensing. Again
there will be a low political risk as well as a low resource cost. Furthermore this method
allows simultaneous expansion into different parts of the world.
One of the biggest disadvantages that could occur by using franchising will be the risk of
being competitor with your own franchisee if, in the case of McDonalds, another restaurant
opens in the same neighbourhood and therefore steals costumers from each other.
Furthermore, the risk of a franchisee ruins the brand with low quality or bad leadership, will
be there all the time.
4.4.5 Turnkey project
This Method is often used by industrial companies that specialize in complex production
technologies.
A Turnkey Project is a method where companies hire contractors to design and construct
36
facilities in the country where they wish to operate. After the construction is done the
contractor will also be in charge of educate personnel for the production or daily work.
The major advantage for this strategy is the possibility to establish a plant and earn profits in
a foreign country without direct investments and lack of expertise. This is also known as
Outsourcing.
5. Analysis
5.1 Choice of country to enter according to Hofstede’s 5 dimensions
In this part of project we will determine cultural differences between two biggest and oldest
Accell Group’s markets, Germany and the Netherlands and Scandinavian countries: Sweden,
Finland, Denmark and the Netherlands.
The following table indicates differences between Germany, the Netherlands and Sweden.
5.1.1 Sweden in comparison with Germany and the Netherlands
Table 5
37
Power distance
First dimension is power distance. It deals with the fact that humans are not equal. The
dimension shows the people’s atitude towards this fact. To put it simple power distance
dimension shows how people accept the fact that power in the society, institutions and
organizations is distributed unequally.
With their strong middle classes Germany, the Netherlands and Sweden are among the lowest
power distant countries. That means, for example, that you do not give direct orders to an
employees, you coach and guide them. All these countries are trying to give their citizens
equal rights.
In all three countries power distance is more or less the same, that means that these countries
are close based on this cultural dimension.
Individualism
Next factor is individualism. The fact adressed by this dimension is the degree of
independence among the members of society. It has to do with people’s self image, does they
define themselves as “I” or “ We”. Thus, in individualistic society individuals are expected
to take care of themselves and their immediate families only. All three countries have very
close level of individualism and it is high. It also means that doing business with people from
these coutries is relatively easy because you don’t need to build any particular relationships if
you want to work with them.
Masculinity/Femininity
Then follows masculinity. Here we can see some significant differences between Germany
and Sweden with the Netherlands. While Germany has high masculinity level, which
basically makes Germany a masculine society. That means that performance is highly valued
and society is driven by competition, achievements and success, while feminine societies,
like Sweden and the Netherlands on the simple quality of life. People tries to make balance
between work and everyday life. Standing out from the crowd is not admirable.
Uncertainty avoidance
The fourth criteria is uncertainty avoidance. It has to do with the fact that future can not be
predicted. Members of the society with high uncertainty avoidance feel threatened by
38
unknown situations more that member of the society with low uncertainty avoidance. As we
can see, Germany is between countries with high uncertainty avoidance. That means, for
example that in combination with Germany’s low power distance dimension were the
certainty for the employee’s decisions isn’t covered by the larger responsibility of the boss,
Germans prefer to compensate for their higher uncertainty by strongly relying on expertise.
The Netherlands have scored 53 on this dimension, thus exhibits a preference to avoid
uncertainty. Both German society and society from the Netherlands have an emotional need
for rules, time is money, precision is the norm, innovations may be resisted, security is
important element in individual motivation.
Sweden scores 29 on this and thus have a low preference for avoiding uncertainty. Overall
attitude in this type of society is more relaxed, people believe there should be no more rules
that are necessary. Schedules are flexible, innovation is not seen as threatening.
Long term orientation
The fifth and the last criteria is the long term orientation. This dimension has to deal with
society’s search for virtues. It is also can be described as the level of society’s pragmatic,
future-oriented behaviour rather than a conventional historical short term point of view. All
three countries scored low on this dimension, that makes them a short term orientation
cultures. Societies with short term orientation cultures generally exhibit strong respect for
traditions, small propensity to save, strong social pressure to “keep up with the others”.
5.1.2Norway in comparison with Germany and the Netherlands
39
Table 6
Power distance
Norway, along with the Netherlands and Germany has low power distance level. That means
Norwegians are independent, have hierarchy for convenience only, support equal rights. In
the work environment power is decentralized and managers count on their team members
experience. Communication is direct, consensus orientated, participative. All these factors
make Norway very similar to our other two countries.
Individualism
Norway has high individualism level, even higher that Germany. That makes Norway an
individualistic society. As it was mentioned before, in individualistic societies the “Self” is
important and individual, personal opinions are valued and expressed. All three compared
countries are highly individualistic, that makes them similar in terms of this dimension.
Masculinity/Femininity
Norway and the Netherlands are highly feminine societies. Germany on this matter differs
from the other two countries, as it has high level of masculinity, thus, it is masculine society.
Norway scores 8 and it is the second most feminine society after Sweden. Softer aspect of
culture are valued. Focus on well-being, status is not showed.
40
Uncertainty avoidance
Norway is right in the middle on uncertainty avoidance dimension, thus it is fairly pragmatic
culture in terms of uncertainty avoidance. That means the there is focus on planning but it can
be changed in a short notice and improvisations made. People are fairly relaxed and not
adverse in taking risks. Uncertainty avoidance in Norway is close to the Netherlands and
Germany. Germany with the level of 65 is already considered as a country where the
preference to avoid uncertainty is high, though. But in general all three countries are close at
this dimension.
Long term orientation
Norway scores 44, that makes it a short oriented culture. Leisure time is important, people are
concerned for stability. Quick results are expected.
Of all three countries Norway has the same long term orientation level with the Netherlands.
Germany score lower on this dimension, but it is still fairly similar to the other two. All three
compared countries share more or less the same long term orientation level, they all are short
oriented societies.
5.1.3 Finland in comparison with Germany and the Netherlands
Table 7
41
Power distance
Finland scores low on this dimension, as well as Germany and the Netherlands. That makes
the Finnish society low power distant one. Thus, all three are much alike.
Individualism
All three countries shares a high level of individualism within society. Although the
Netherlands has a highest level among these three countries, Finland with a score of 63 can
be considered an individualistic society like most Europeans countries are. Thus, it has all the
features that are common for highly individualistic societies.
Masculinity/Femininity
Finland is feminine society together with the Netherlands, while Germany is considered as
Masculine society. Although Finland is the least feminine society of all Scandinavian
countries, it can be considered a feminine society comparing to the rest of the world.
Uncertainty avoidance
Finland score 59, thus it has a medium high preference for avoiding uncertainty.
It is the highest uncertainty avoidance level among all Scandinavian countries. That means
Finnish society can be scared of innovations and can reject them.
Long term orientation
With the score of 41 Finland is in the middle between the Netherlands and Germany. That
score makes Finnish society short term oriented. Therefore it has all the attributes which are
common for this kind of society.
5.1.4 Denmark in comparison with Germany and the Netherlands
42
Table 8
Power distance
Denmark is at the very low end of this dimension if we compare it to the other countries.
Denmark ranks highest among the EU27 countries in terms of employee autonomy.
Workplaces have a very informal atmosphere. From all 6 countries we have compared
throughout our project Denmark has lowest power distance score.
Individualism
With its score of 74 Denmark is obviously an individualistic society. If we compare its level
of individualism to Germany or the Netherlands we can see that Denmark is somewhere in
the middle between these two countries. Thus, the level of individualism in Denmark is
common for western Europe and Scandinavia.
Masculinity/Femininity
Denmark scored 16 on this dimension. It is only two points ahead of the Netherlands and it
can be said that by that dimension these two countries are fairly similar.
Uncertainty avoidance
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With a score of 23 Denmark is the least uncertainty avoidant society in Scandinavia. If we
will compare that with Germany and the Netherlands we will see that Denmark scores lowest
on uncertainty avoidance level too.
That means Danes do not need a lot of structure and predictability in their work and life.
Curiosity is natural and encouraged from the very young age. The combination of a highly
individualistic and curious nation is the driving force for Denmark’s reputation within
innovation and design. What is different is attractive. This emerges throughout the society in
heavy consumerism for new and innovative products.
Long term orientation
The Danes score 46, they are short oriented culture, though very close to the middle. Danes
scored the most among our 6 discussed countries in terms of long term orientation. That also
means that Denmark may be engaged in a long term planes and projects. In our opinion that
gives a wide field for discussion about innovations and innovative products that can be used
with perspective for the future.
5.1.5 Choice of country for Accell group to enter based on Hofstede’s analysis
In terms of our project we should answer the question how innovations can affect
internationalization process of a firm. Another goal of our project is to find out and specify
what country would be the best choice for Accell Group to internationalize in terms of their
product line and experience.
As it was mentioned before Hofstede operates with 5 dimensions each of them is responsible
for society’s believes and habits in different fields.
In order to find out which one of Scandinavian countries’ would be more suitable for Accell
Group to enter first we need to compare all five dimensions of each country from the above
chapters and find which one is closest to Accell’s Group oldest markets – the Netherlands
and Germany. However, while all 5 Hofstede’s dimensions are equal and valuable parts
theory, in our case some of them are more important in terms of products of Accell Group
and our chosen topic. That means, for example, that uncertainty avoidance is much more
important that masculinity because it has to deal with society’s acceptance for all new and
innovative and that is exactly what we need to figure out according to the project’s main
topic.
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All Scandinavian countries possesses high level of power distance. Most European countries
do. That makes all our 6 countries very similar.
However Denmark scored lowest among all 6 countries on power distance dimension. That
means there will be a high employee’s autonomy at work place. That could be a good thing
because in that case company do not need to hire many supervisors to control employee’s
work process. Thus, less expenses at the work places.
All our chosen countries demonstrates high level of individualism in societies. It doesn’t
significantly differs: from 63 in Finland to 80 in the Netherlands. Any of these values is
considered high in terms of Hofstede’s individualism dimension. So it can be concluded that
we can not choose the best country to enter in terms of a second dimension.
Masculinity level in both Scandinavian countries and the Netherlands is low. In Germany it’s
high. Since it has to deal with consumeristiccharacteristics of the society it is important for
this project. In masculine societies it is common to show a status – by cars, watches, technical
devices, etc. In feminine societies it’s different, focus is much more on quality of life. Since it
is relatively hard to show a status with bicycle, either sports or electric it could be hard to sell
these in masculine countries. Especially while the price for electric bicycle can be quite high.
Thus, that kind of innovative product could fail in masculine societies because of the
mentality which states – if you pay big amount of money, you get the product which shows
your status. Electrical bikes are rather an element which extends person’s quality of life.
Thus, it could be a success in countries with feminine societies since they are focused on the
quality of life, cosiness and comfort much more. By that point all 4 Scandinavian countries
could be a good choice to enter for Accell. The lowest masculinity level is in Sweden.
Uncertainty avoidance can be the most important dimensions in terms of innovations.
Hofstede claims that societies with high uncertainty avoidance have a tendency to resist to
innovations. People in this type of societies are intolerant of unorthodox behaviour and ideas.
Thus, it can be very hard to bring something new and make it a bestseller. On the other hand,
countries with the low uncertainty avoidance level are open to innovations. In societies of
that type curiosity is encouraged from the young age and people don’t see innovations as
something threatening, they accept them.
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All of our chosen countries, except Sweden and Denmark maintain rather high level of
uncertainty avoidance that makes their societies and, of course, people hard to reach to with
innovative products. But Sweden and Denmark are different. It is important to mention that
uncertainty avoidance itself is important but much more important is combination between
high level of individualism and low uncertainty avoidance. Denmark scores highest among
Scandinavian countries on individualism and lowest on uncertainty avoidance. That
combination between high individualism and low uncertainty avoidance, which means
curiosity as a national future. Danes find innovations attractive. And according to Hofstede
that is shown through heavy consumerism for new and innovative products. According to
uncertainty avoidance dimension Denmark is the best country to sell innovative and unusual
products.
The last dimension is long term orientation. Most European cultures are short oriented and
our chosen 6 countries are not an exception. However Denmark scores highest on this
dimension. That makes it a bit more long-oriented culture than other Scandinavian countries,
Germany and the Netherlands. That could mean that people think about the future in a longer
perspective, which can be the factor to attract innovations, such as pollution-free transport as
bicycles, as well as electric ones. So it can be considered that high long term orientation level
is a plus for Accell Group in making choice of country.
In conclusion of the above it can be said that Denmark is the suitable country to enter for
Accell Group. It possesses several important advantages according to Hofstede’s dimensions
which could have major affect on future sells of innovative products and technologies Accell
Group working on.
The above topic is perfect example how innovations can affect internationalization process.
While non-innovative firms are firs looking into different dimensions, like masculinity and
power distance, innovative firm should consider completely different dimensions Hofstede’s
model is offering. Innovations has to deal more with uncertainty avoidance and
individualism, thus these dimensions are the most important. It could be concluded that
innovations can affect firm’s internationalizations in terms of choice of countries. Innovative
firms have to offer more to the innovative countries, countries with higher standards of living,
stronger economy.
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5.2 Interview
For deeper understanding of questions which are analyzed in the project we have used
interview as primary data. It was short 10minutes phone call with one of the managers from
Sparta B.V company. Goals of the interview were:

Gather information on the company

Gather information on the function

Gather information on processes of innovation and internalization

Uncover problem defined in our project

Gather opinions or viewpoints on our analyzing problem

Provide information
We used phone call as type of interview because of advantages showed in table above
Figure 6 Advantages and disadvantages of phone interviews (http://www.martymodell.com/pgsa2/pgsa07.html)
From the interview we greatly increased our understanding about innovations affect on
internationalization and get viewpoint and opinion about expanding company to Scandinavia.
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We discussed about further internationalization of the Sparta B.V and Manager agreed with
us that Denmark is best choice because of:

It’s close to Netherlands and Germany

Increasing e-bikes sales

Similar segment of customers
5.3 Uppsala model
It is based on the process and order that several Swedish firms seemed to follow during their
internationalization processes in the late sixties and seventies. The findings suggested that
firms in their internationalization processes incrementally increases their commitment on a
foreign market by increasing their presence as time passes and knowledge of the market
grows. Firms began expanding to markets that were most similar to their domestic market
(Johanson & Vahlne, 1977). These findings were contradicting with the present truth about
internationalization at that time (Johanson & Vahlne 1977, 2009). In the first article of the
Uppsala Model, it was argued that companies entered new markets with a low level of
commitment, e.g. exporting via agent, establishing a sales subsidiary and launching a
production facility. As their knowledge of the market increased, more resources would be
invested. The increased presence would then lead to an increase in knowledge and further
commitment (Johanson & Vahlne 1977, 2009). Although Johanson and Vahlne focus on
specific entry modes in the original paper from 1977, in more recent papers they point out
that the model is not about entry modes, but instead about the processes of
internationalization (Johanson & Vahlne 1992). The model aims to explain management’s
decisions, on opportunity and risk taking, based on the firm’s level of commitment to a
foreign market. Furthermore it explains how the experience and learning processes within the
firm affect management’s decisions.
The model states that companies first seeks foreign markets that are geographically close,
similar in terms of cultural differences and offer a certain degree of comfort (low trade
barriers, access to market insights etc.), and get familiar with these markets, before seeking
new markets that are more distant. The model is more likely to be used to explain
internationalization of production companies and therefore not all of the steps in the Uppsala-
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model can be transferred to the internationalization process of Sparta B.V company – they
expanded already to Germany, so Denmark isn’t the first country for internationalize.
Using this model we can claim that Netherlands and Scandinavian countries have a lot in
common in high variety of aspects and internationalization to this countries could be
significantly simple, profitable and more eligible. In other chapters of analyses will be
explained why from Scandinavian countries we choose Denmark to internationalize, beside
this reasons this country is geographically closest to Netherlands which proves Uppsala
model.
5.4 Innovations impact on choice of entry mode
Exports encourage firms to innovate by exposing them to stronger competition as well as to
the requirements and innovation environment of diverse markets and customers.
Imports increase the firm’s exposure to new products and possibly to new processes. New
knowledge is often embedded in new machinery and products and their availability via
importation facilitates learning in countries other than the one where they were produced.
Moreover, the firm importing intermediate products may have to adjust its production
processes to accommodate them. Thus, imports of innovative products may contribute to
innovation by: increasing the absorption capacity of the firm and by forcing the firm to
innovate in order to accommodate the new product within its production processes.
High levels of general innovation roots in creating major industries within engineering and
technology, the desire to apply technological insight to environmental challenges, strong
government backing and a high level of public environmental awareness are (Amy Brown’s
2007) justification of the strong position of the Nordics in the ranking
Because of reasons mentioned above we think that’s why Scandinavian countries are open for
innovative companies (Hofstede’s analysis shows very low uncertainty avoidance which
means they are not afraid of innovations).Cleantech-analysis shows that Scandinavian
countries always wanted to be and always was leading countries to innovations sphere.
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Figure 7 Map of overall global cleantech innovation index scores (source: cleantech group analysis, 2012)
Scandinavian countries desire for innovations and are very open for them, this fact can help
us to choose entry mode for internationalization for company which are highly focusing on
innovations like Accell group. Accell has a lot of innovative companies in their group, but
best choice for entering to Denmark reasoned by our research is Sparta B.V.
We choose Sparta B.V Company because itis a true speciality brand, responsible for
innovations such as special bicycles for mothers, trendy bikes for young people and the
electric bicycle. Both the trendy bicycles and the electric bicycles began new market
segments that are now an indispensable part of today’s bicycle stores. Sparta still continues to
develop the concept with new models and marketing ideas. Both the market for and the image
of electrically-assisted bicycles are developing strongly. The electrically-assisted bicycle is
increasingly also seen as a way of meeting today’s mobility demands while have a positive
impact on the environment, which means the brand also appeals to new target groups.
(Annual report,2012). This company is the biggest electric bicycles seller in Europe.
5.4.1 Entry mode for Accell group
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Because of the reasons mentioned in chapter above we think Accell Group should use wholly
owned subsidiaries because:
1) Even if it is a risky entry mode, but it gives a high control and revenue. And a
risk is significantly decreased because of entering in such innovative-open,
cycling loving country as Denmark
2) Denmark is located near the Netherlands and Germany and those 3 countries
have a lot of in common, so according to Uppsala model risk is reduced then
entering to new neighbour country
3) According to Hofstede’s 5 dimensions Denmark is very close to one of the
biggest Accell’s group’s markets – the Netherlands and by that we can decide
that entering the country and establishing of a new firm will be easy enough.
There are some other advantages that Denmark possesses according to
Hofstede’s 5 dimension model in Uncertainty avoidance perspective.
4) Denmark have a biggest electric bicycles market and biggest bicycle per
person purchase comparing with other Scandinavian countries so market is
huge and its keeping to growth
6. Conclusion
Internationalization in the worl is increasing and every year more firms are going out of their
usual markets in order to expand their business. Many firms are using innovations in their
management, retail system, products. However is innovations really have major affect on
internationalization process?
Our research compared several countries using Hoffstede’s 5 dimensions. We came up with
an idea of using two of these dimensions in order to figure out what country Sparta B.V
should choose. It is indicative that the best choice is Denmark. In case of normal, usual
products we don’t have a dilemma of acceptance. And having unique and unusual product
line company need to search for most suitable market using tools that differs from usual. It
can be stated that innovations in product line are narrowing possible choices of countries to
internationalize but bring certain confidence to that choice.
In our project we looked into different entry modes and explain what choice would be most s
Big multinationals tend to use more secure entry modes when first enter the country. They
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use licensing, franchising, joint venture at some points. If we take into account huge
innovative firms common entry modes would be the ones with high control level, wholly
owned subsidiaries, joint ventures. That happens because before entering the market every
firm analyses it and the common situation with companies which are selling highly
innovative products that there is only few competitors in the market. Thus, companies can
afford to open physical stores with wholly owned subsidiaries – they know they will sell their
products because they are unique.
Thereby it can be stated that innovations play significant role in company’s decisions related
to internationalization, in choice of country and choice of entry mode.
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